Does Purdy Crawford deserve to be stripped of his Order of Canada too? !!
à la Alan Eagleson, Conrad Black, David Ahenakew, etc.?

----- Original Message -----

Subject: Purdy Crawford was CEO of Imasco, when Imperial Tobacco Conducted
the Illegal Tobacco Smuggling that it Admitted Today
The RCMP made the following announcement today, July 31, 2008, concerning admission of guilt by Imperial Tobacco on illegal tobacco smuggling during 1989-1994. Purdy Crawford was the CEO of Imasco during 1985-1995, which covers the 1989-1994 time period when Imperial Tobacco, a wholly owned subsidiary of Imasco, conducted the illegal activity of tobacco smuggling for the purpose of avoiding the payment of Canadian tobacco taxes. Purdy Crawford is now employed at Oslers LLP and he is the Chairperson of the Pan Canadian Committee, who are the applicants for the ABCP CCAA Restructuring Plan, being administered at the Ontario Superior Court of Justice.
From attached RCMP Media Release dated July 31, 2008:

""The guilty pleas, from Imperial Tobacco Canada Limited (ITCL) and Rothmans Benson & Hedges (RBH), are the culmination of more than eight years of investigative work by RCMP Customs and Excise sections in Ontario and Québec. As part of agreed statements of fact, the two companies admitted to “aiding persons to sell and be in possession of tobacco manufactured in Canada that was not packed and was not stamped in conformity with the Excise Act and its amendments and Ministerial regulations.”

As a result, the two companies have paid the largest fines ever levied in Canada; ITCL has paid a $200-million fine and RBH $100-million.""

"The material time of the charges involved illegal activity between the years of 1989-1994. Then, the contraband tobacco market in Canada involved product being produced in Canada, and shipped to locations in the US near the Canada/US border. From there, it was distributed to smugglers or black market distributors who brought it back into Canada for further illegal distribution."

Justice in Canada Lesson: Before Committing a Crime, Be Sure to Incorporate.

Since a corporation is nothing but an artificial legal person incapable of anything on its own, who were the real people in these corporations that oversaw these illegal activities? Was it some overzealous warehouse employee or was it orchestrated further up the food chain? Why is nothing being done to prosecute the real people who committed these crimes? What about all the people in the food chain who personally benefitted from these illegal actions through salaries, bonuses and other payments?

Are we not demonstrating yet again that petty criminals and bank robbers should look to the corporate model and the Canadian "justice" system and incorporate themselves???

That way, if they get caught, it is only their corporate structure that will get fined and they will get to keep the ill-gotten gains scott-free. A future announcement would be "Bank Robbers Incorporated was today fined $10 million..." I mean if the corporate model works so well for the huge illegal activities, why should it not be copied and used by people will smaller scale ambitions?

This decision along with the ABCP legal decision amongst others, demonstrates that doing illegal things in this country does pay---as long as you are conduct your nefarious activities within an artificial corporate structure.

Another great lesson has just been served for the benefit of today's students and tomorrow's leaders.

Thanks to all of you for showing the way and for doing nothing about it!

Not all psychopaths become fraudsters, but some fraudsters are psychopaths. A fraud examiner's job is to help deter fraud by discretely noticing those employees who might be exhibiting psychopathic tendencies. Psychologists Robert D. Hare, Ph.D., and Paul Babiak, Ph.D., experts in psychopath studies, explain how these aberrant characters can infect organizations and provide ways to deal with them.

Sam strode into the lobby of Bacme Manufacturing. Impeccably dressed in a tailored suit, carrying a burnished leather briefcase, he smiled at the receptionist. "Hello. I'm Sam Smithson, here to see Mr. Tolliver for my second interview." "Yes, Mr. Smithson. Mr. Tolliver is ready to see you." Eyes turned as Sam walked up the stairs.

"Sam! So good to see you!" "It's great to be here again, Mr. Tolliver!" During the national economic downturn, Bacme was suffering and needed a few "white knights." Sam had the requisite resume, leadership qualities, and enthusiastic spirit the company needed to boost morale and the bottom line as a vice president.

Unfortunately, Mr. Tolliver didn't know that Sam was a textbook psychopath. Behind his smile and relaxed manner, he was dishonest, devious, and manipulative. He pretended to be an empathetic listener, but most of the time he had only one person on his mind.

Within a year, Sam had ingratiated himself to staffers who could benefit him: top executives but also the "informal leaders" - middle managers and administrative assistants who got the real work done. Soon he was controlling vast areas of the company and began embezzling funds. By the time the corporation realized it was missing millions of dollars, smiling Sam, "the white knight," was on to the next corporation.

Not all psychopaths become fraudsters, but some fraudsters are psychopaths. A fraud examiner's job is to help deter fraud by discretely noticing those employees who might be exhibiting psychopathic tendencies.

Robert D. Hare, Ph.D. and Paul Babiak, Ph.D., authors of "Snakes in Suits: When Psychopaths Go to Work" (www.SnakesInSuits.com and available in the ACFE Bookstore), have been studying psychopaths and their effects for years. Babiak is an industrial and organizational psychologist and president of HRBackOffice, an executive coaching and consulting firm specializing in management development and succession planning (www.HRBackOffice.com). Hare, the creator of the standard tool for diagnosing psychopathy and author of "Without Conscience: The Disturbing World of the Psychopaths Among us," is an emeritus professor of psychology at the University of British Columbia and president of Darkstone Research Group, a forensic research and consulting firm (>www.hare.org).

"Psychopaths invest energy in creating and maintaining a façade that facilitates their careers," said Hare. "During the hiring process they convince decision makers of their unique talents and abilities - albeit based upon lies and distortion.

"Executives are always looking for the best and brightest … but there are not that many from which to choose," Hare said. "As times goes on, the psychopath will continue to manage this positive reputation for as long as it is useful to him or her. … Executives view themselves as good judges of people, and few want to be told that they were wrong about something as basic as honesty and integrity. This aspect of human nature works in favor of the psychopath."

Hare will be a keynote speaker at the 19th Annual ACFE Fraud Conference & Exhibition in Boston in July. He spoke to Fraud Magazine from his home in Vancouver, B.C., and Babiak from his home in Dutchess County, N.Y.

Do you believe that most fraudsters are psychopaths or do they just exhibit anti-social behavior?

Hare: There are many reasons why people engage in fraudulent behavior, some related to economic necessity, cultural, social, and peer pressures, special circumstances, opportunities, and so forth. Many of these people are small-time criminals just "doing their job," and their victims are relatively few in number. Much more problematic are fraudsters whose activities reflect a virulent mix of personality traits and behaviors including grandiosity; sense of entitlement; a propensity to lie, deceive, cheat, and manipulate; a lack of empathy and remorse; an inability to develop deep emotional and social connections with others; and the view that others are merely resources to be exploited - callously and without regret. These white-collar psychopaths often are heavily involved in obscenely lucrative scams of every sort. They lead lavish lifestyles while their victims lose their life savings, their dignity, and their health - a financial death penalty as one law enforcement officer put it. The public and the courts have difficulty in appreciating the enormity of the damage done by these social predators, and because their crimes often do not involve direct physical violence, they may receive comparatively light fines and sentences, and early parole. The money obtained from their depredations is seldom recovered, leaving the victims and the public bewildered and convinced that crime certainly does pay when committed by those whose charm, egocentricity, and deception disguise a flabby conscience.

You've designed the "Psychopathy Checklist - Revised" (PCL-R), the standard tool for diagnosing psychopathy. Can you briefly describe its methodology and how it differs from other forms of measurement?

Hare: The PCL-R is a 20-item clinical construct rating scale for the assessment of psychopathy in forensic populations. Qualified professionals use interview and detailed file/collateral information to score each item on 3-point scales (0, 1, 2) according to the extent to which an individual matches explicit criteria for the item. The resulting total scores can vary from 0 to 40 and reflect the extent to which the individual matches the "prototypical psychopath." One derivative of the PCL-R, the Psychopathy Checklist: Screening Version (PCL: SV), often is used in community and civil psychiatric research on psychopathy. It has 12 items, with total scores that can vary from 0 to 24. The items in each instrument are grouped into the same four factors or dimensions, each of which contributes to the measurement of psychopathy. For example, the items in the PCL: SV dimensions are: Interpersonal (Superficial, Grandiose, Deceitful); Affective (Lacks remorse, Lacks empathy, Doesn't accept responsibility for own behavior); Lifestyle (Impulsive, Lacks goals, Irresponsibility); Antisocial (Poor behavioral controls, Adolescent antisocial behavior, Adult antisocial behavior). The PCL-R and the PCL: SV are strongly related to one another, both conceptually and empirically and have much the same psychometric, explanatory, and predictive properties. Because of their demonstrated reliability and validity, they are widely used in basic and applied research on psychopathy and for clinical and forensic evaluations.

The personality disorder measured by the PCL-R is similar to antisocial personality disorder (ASPD), described in the American Psychiatric Association's DSM-IV. The difference is that the PCL-R places considerable emphasis on the interpersonal and affective traits associated with psychopathy, whereas ASPD is defined more by antisocial behaviors. As a result, ASPD fails to capture the traditional construct of psychopathy and is much more prevalent in community and forensic populations than is psychopathy.

Self-report personality inventories also are used for the assessment of psychopathic traits and behaviors. The information provided by these instruments reflects the individual's self-understanding and evaluation, what he or she is willing to disclose to others, and impression management. It may be difficult to obtain accurate self-reports of affective experiences associated with psychopathic tendencies. Further, self-report measures of psychopathy are only moderately correlated with the PCL-R and its derivatives. Nonetheless, they provide useful information from the individual's perspective, and contribute to our understanding of the psychopathy construct, particularly in the general population. One derivative of the PCL-R is the B-Scan or Business Integrity Scan, which includes both a self-report version and a supervisor's rating version. We developed the scan out of our experiences with, and research on, the lack of integrity and honesty of corporate psychopaths. Although not a clinical measure of psychopathy, it is designed to tap into the behaviors, attitudes and judgments relevant to ethical business practices (www.B-Scan.com/).

You've written that many people, after reading or hearing you speak, begin wondering if their bosses and co-workers are psychopaths - or even themselves! I imagine all of us exhibit psychopathic traits at various times, but what are the prevailing characteristics that you believe a person must exhibit to actually be diagnosed as a psychopath? How do you distinguish a psychopath from a difficult person?

Hare: Television constantly describes the symptoms associated with an endless list of diseases, some real, some contrived. The viewer may have one of the symptoms of disease X, say a sore throat, and worry that he or she has the disease. But this symptom is shared by scores of conditions other than disease X, and sometimes a sore throat is simply a sore throat. What people don't take into account is that a given disease or medical condition is defined and diagnosed by a set of symptoms, a syndrome, and that one or two of the defining symptoms may be of little diagnostic value. One symptom does not a disease make, nor does being impulsive, egocentric, irresponsible, and so forth make someone a psychopath; difficult, perhaps, but not psychopathic.

Psychopathy is defined by having a heavy dose of the features that comprise the disorder. How heavy? Like blood pressure, the construct measured by the PCL-R and PCL: SV is dimensional. The threshold for "high blood pressure" or for a label of "hypertensive" is somewhat arbitrary, but typically falls in a range where there is increased risk to the individual's health. The threshold for "psychopathy" also is somewhat arbitrary, but generally is set rather high, at a level where the individual's manipulative, callous, egocentric, predatory, irresponsible, and remorseless behaviors begin to infringe upon the rights and safety of others. For example, researchers often adopt a PCL: SV score of 18 (out of 24) for "probable psychopathy," and a score of 13 for "possible psychopathy." To put this into context, the average PCL: SV score is less than 3 for samples from the general population, and around 13 for samples from forensic populations. Most of those in the general population receive a PCL: SV score of 0 or 1. So, even those who appear to exhibit a few psychopathic features would fall well below thresholds for possible or probable psychopathy. This does not mean that such individuals are saint-like; they could still be very "difficult" for reasons other than psychopathy. Their values, beliefs, or personal style may not be appealing to us, but they may be honest, have integrity, experience emotions at a real level, and contribute to the success of the organization. These "difficult" people also can make sincere efforts to moderate their attitudes and behaviors so as to fit more comfortably into the corporate culture or social norms of their work group. Psychopaths, on the other hand, lack integrity, are dishonest and manipulative, and do not experience deep-seated emotions. They may go through the motions of change in order to achieve their goals, but it will be little more than play-acting. Like Iago in Shakespeare's Othello, psychopaths can be "good" or "bad," depending on what is likely to work best at the time.

What do psychopaths want? What are their motivations?

Hare: They want many of the same basic things that the rest of us want, but, in addition, have an inordinate need for power, prestige, wealth, and so forth. They differ from most of us in terms of how much they "need," their sense of entitlement to whatever they want, and the means with which they are willing to achieve their ends. They also differ dramatically from others in the communal nature of their needs and goals. That is, the sense of altruism, concern for the welfare of family, friends, and society, and the social rules, expectations, and reciprocity that guide most people are irrelevant to psychopaths. They operate according to their own self-serving principle: look out for number 1, no matter what the cost to others, and without guilt or remorse.

Do psychopaths feel emotions and respond to emotions in others?

Hare: The emotional life of psychopaths lacks the range and depth found in most individuals. It often is described as shallow and barren, consisting mostly of "proto-emotions," somewhat primitive responses associated with their own needs and experiences. Their displays of anger, hostility, envy, and response to frustration are likely to be much more intense and genuine than their feelings of empathy, love, shame, and sorrow. While at times they may appear cold and unemotional, they are prone to dramatic, shallow, and short-lived displays of feeling. They are able to mimic emotions rather convincingly, but an astute observer may be left with the impression that they are play-acting and that little is going on below the surface. This, of course, raises an interesting question. If their own emotional life is relatively barren how are they so adept at "reading" and responding to the emotions of other people? The answer seems to be that they have learned that what others describe as a given emotional state is reflected in a distinct pattern of verbal cues and body language. Psychopaths are able to use this information to intuit an emotional state that they don't really understand. In this sense, they are like a color-blind person who "recognizes" color because of the context in which it occurs (the red light is at the top of the traffic signal) and therefore gives the appearance of color perception. However, no amount of training and practice will allow the color-blind person to really understand color or the psychopath to really understand the emotional life of others, except in a vague intellectual, inferential sense. To put it simply, they don't know how you feel, nor do they much care.

You've written that some researchers have said that psychopaths "know the words but not the music." What does that mean?

Hare: It means that psychopaths understand the denotative, dictionary meanings of words but do not fully appreciate their connotative, emotional meaning. Their language is only "word deep," lacking in emotional coloring. Saying "I love you" or "I'm truly sorry" has about as much emotional meaning as saying "have a nice day." This lack of emotional depth in language is part of their more general poverty of affect as described by clinicians and observed in neuroimaging studies.

What are the differences between psychopaths, sociopaths, and those with narcissistic personality or histrionic personality disorders?

Hare: The terms psychopathy and sociopathy refer to related but not identical conditions. Psychopaths have a pattern of personality traits and behaviors not readily understood in terms of social or environmental factors. They are described as without conscience and incapable of empathy, guilt, or loyalty to anyone but themselves. Sociopathy is not a formal psychiatric condition. It refers to a pattern of attitudes, values, and behaviors that is considered antisocial and criminal by society at large, but seen as normal or necessary by the subculture or social environment in which it developed. Sociopaths may have a well-developed conscience and a normal capacity for empathy, guilt, and loyalty, but their sense of right and wrong is based on the norms and expectations of their subculture or group. Many criminals might be described as sociopaths. Narcissistic and histrionic personality disorders are described in DSM-IV, and their differences from psychopathy are outlined in "Snakes in Suits." Briefly, narcissistic personality disorder involves an excessive need for admiration, a sense of superiority and entitlement, and a lack of empathy. It does not necessarily include the lifestyle and antisocial features of psychopathy, outlined earlier. Histrionic personality disorder is defined by excessive and overly dramatic emotionality, attention-seeking, and a strong need for approval. It lacks the lifestyle and antisocial features of psychopathy.

Do we have research that indicates that a person is a psychopath because of genetics, the environment, or both? If it's partially environmental, what could happen to a person so he or she develops into a psychopath?

Hare: All personality traits are the result of genetic-environmental interactions. Recent research in behavioral genetics indicates that callous-unemotional traits and antisocial tendencies, likely precursors to the dimensions of psychopathy described earlier, are highly heritable. There is no evidence that psychopathy can result solely from social or environmental influences. This doesn't mean that some people are destined to become psychopaths, only that the process of socialization is much more difficult for those with early indications of the precursors of the disorder.

Do male and female psychopaths practice their deceptions in different ways? If so, how?

Hare: There are many clinical accounts of female psychopaths but relatively little empirical research. The available evidence suggests that male and female psychopaths share similar interpersonal and affective features, including egocentricity, deceptiveness, shallow emotions, and lack of empathy. All will make maximum use of their physical attributes to deceive and manipulate others, but female psychopaths may be less prone than males to use overt, direct physical aggression to attain their ends. The term femme fatale comes to mind.

What are some ways that companies can screen out psychopaths during the interview and background check processes? This has to be extremely hard because psychopaths exhibit all the right qualities (and fake the rest) when companies are vetting them for jobs.

Babiak: Psychopaths make great first impressions and have extremely effective interviewing skills, so relying on employment interviews alone when making hiring decisions can lead an organization to make the wrong choice. The risk is increased by the use of untrained or inadequately trained interviewers who are unaware of the psychopath's skill at lying and deception, and therefore don't take the necessary extra steps to verify all information collected.

Improving one's chances of detecting psychopathic lying during the employment process requires verification of all details presented (knowledge, experience, expertise), and exploring and challenging discrepancies. Psychopaths talk a good game on a surface level, and will use technical jargon and glib, superficial charm to convince the interviewer of their experience and expertise. As much as possible, résumé data should be checked before the interview. Then, by using structured interviewing techniques and multiple interviewers from different functions and levels in the organization, inconsistencies can be explored further and details drilled down.

It is critical that all interviewers get together to share their findings and impressions before an offer is made. During this important meeting, the discrepancies noted and possible deceptions will be uncovered. Relying on a group decision removes the psychopath's advantage in manipulating just one interviewer successfully.

Can you talk briefly about the "three personalities" that are within all of us?

Babiak: Deep down we all have a private experience of ourselves, our personality, which consists of our needs, values, emotions and so forth. This self-perception includes things we know about ourselves that we are comfortable sharing, other characteristics we wish to keep private, and even some parts that are unknown even to us. This is our inner or private personality. When we deal with others, though, we tend to limit the presentation of our personality to those things we like, are socially acceptable, and can positively influence those around us. This is our persona, or public self. We wear this mask in public. The third point of view of the personality is our reputation among those who know or interact with us; that is, our attributed personality.

In a business world, where "perception is reality," this last view of our personality - our reputation - is the most important. It influences how others will treat us and how decisions are made about us, and can ultimately foster or derail our careers. Unfortunately, many people are unaware of or discount this view of themselves. Sometimes it is only upon receipt of hard data, often in the form of "360-degree" feedback given during training programs, that they learn how others really perceive them.

The psychopath operates on the surface level, presenting a mask or persona that is in keeping with the expectations of the organization and its members. Typically, this mask is: "I am the ideal employee and leader." The psychopath invests considerable effort creating and managing this façade through impression management techniques. Those who have power and authority will be shown only this mask - that is, the façade of an employee who is honest, productive, caring, with leadership potential, and so forth - and will integrate it into their evaluation of the psychopath - in effect, the psychopath's reputation. Those who are of little value to the psychopath will not receive such careful impression management, and may come to see the psychopath for who he or she really is. Unfortunately, however, they are often in positions least likely to influence the thinking of those in power.

In a nutshell, how do psychopaths judge the personalities of others?

Babiak: Psychopaths often come across as good psychologists, but in reality they are just more observant of others and are motivated to take advantage of the traits, characteristics, and personal situations of those around them. Psychopaths use the same three-part personality model to build strong relationships with others. They initially present a charming, charismatic mask, persona, which is often quite likeable. When they want to deepen the relationship (because the target has something they want), they first convince the target that they truly like him or her (that is, like his or her own persona or outward self). Then, they convince the target that they are more similar than different in many ways (including at the deep psychological level). Thirdly, they convince the target that they fully understand and accept the target's own true, private, and inner personality (the one with all of its secrets), and, therefore, because of this acceptance, they can be trusted. Finally, they convince the target that they (the psychopaths) are the ideal friend, partner, coworker, and so forth; this forms the "psychopathic bond." This bond is quite seductive, as few people reach this level of psychological intimacy with others in the work environment. Once this bond is formed, it is very difficult for the target to see the truth about the psychopath as he or she continues to be manipulated.

In business situations, do psychopaths target particular individuals? If so, what kinds of persons?

Babiak: Psychopaths are always on the lookout for individuals of whom they can take advantage. We often correctly assume that they target those with high status and power in the organization, but they also identify those with subtle, informal power in the organization. For example, many secretaries control access to their principals whom a psychopath will want to influence. Middle-level managers control the flow of materials, information, and processes that might prove useful to a psychopath. Individual contributors in professional positions (for example, those in IT, finance, and auditing), despite the lack of authority over staff, have great amounts of influence over information and other resources useful to the corporate psychopath. Any person with perceived utility to the psychopath will be targeted.

I know this is complex, but how are psychopaths able to manipulate people within an organization to be, as you call them, "pawns," and "patrons"?

Babiak: This model evolved out of our observations of how the "psychopathic drama" unfolds. It captures the theatrical nature of the psychopaths' view of organizational life. Psychopaths see themselves as the writers, directors, and producers of the dramas that are their lives - on and off their jobs; other people only exist to fulfill the supporting roles required of them - the pawns, and patrons.

Psychopaths form bonds with many people in the organization; that is, psychopathic bonds, not real ones. The psychopath views as pawns those who have the power, status, or access to desired resources, to be used until their utility is gone, and then dispensed with or even sacrificed. Patrons are those key power holders whom the psychopath relies upon for protection and defense when things get uncomfortable, much like the "mentors" or "godfathers" who exist in many large companies to assist high potentials negotiate their way through the political minefields to the top.

In addition, there is the patsy - a former pawn or patron whose organizational power and influence has been effectively neutralized by the psychopath. Finally, there are the organizational police, those in control positions such as accounting, HR, IT, and security who are in the best position to unseat the psychopath, but who often are not listened to by those in power, and who have already been trapped in the psychopathic bond. The psychopath prefers to avoid the organizational police (they tend to have ethical and professional values which are anathema to the psychopath), but having one in his or her vest pocket can be invaluable.

It makes sense that psychopaths would try to influence recognized top managers, but how do they manipulate and use "informal leaders," those who wield influence but might not be high on the organizational chart?

Babiak: While formal power holders are credited with leading their organizations, it is often a group of informal leaders who gets things done on a day-to-day basis. Unfortunately, in many companies, these informal leaders are the unsung heroes - and feel as such. What better person to convince that they have value and a friend in high places, as the psychopath moves up, than these individuals? They are the perfect targets from the up-and-coming psychopath's point of view.

How can a person avoid becoming ensnared in a one-sided relationship with a psychopath?

Babiak: Knowledge certainly is power in this case. It is important to learn as much as one can about psychopaths - their traits and characteristics, and how they operate. Furthermore, one should learn more about oneself, particularly those things that would make one attractive to a psychopath. These can include power and control of resources (formal and informal), as well as any psychological or emotional weak spots or hot buttons that can be used to unduly influence you. Psychopaths don't operate in a social vacuum, and those with whom they have worked or interacted can be valuable sources of information.

You've written that once psychopaths are within an organization, they revert to their natural three-phase behavior pattern - assessment, manipulation, and abandonment. Can you briefly describe those three steps? Can you also describe the ascension phase?

Babiak: In society, psychopaths exhibit a fairly consistent pattern of behavior. They identify targets (assessment phase), use them (manipulation phase), and dispense with them when their utility is used up (abandonment phase). In organizations, the abandonment phase is difficult to manage, as the psychopath cannot just move on, in the physical sense. This can lead to confrontations with former pawns who now feel like patsies. But the psychopath has already prepared for this, having spread disparaging information about these individuals - that is, "poisoned the water" - among those in positions of power. Those who ultimately confront a corporate psychopath often come to find themselves on the chopping block.

In some cases, psychopaths see opportunities to move up in the power hierarchies by unseating those who have mentored or protected them, their patrons, in the ultimate acts of betrayal. This form of ascension can be particularly rewarding to a psychopath who has played both the patron and other members of the organization.

Are most corporate and organizational psychopaths loners or do they sometimes team up with other psychopaths to pull off fraud schemes?

Babiak: Most of the individuals we have met have been "loners" in the sense of only thinking of themselves; however, they do surround themselves with supporters and followers to facilitate their activities. To the degree that the psychopath can get these naïve supporters to believe that their actions are consistent with their own personal values, the game remains in play.

Occasionally, two psychopaths may work as a team in the same organization, at least for short periods. Inevitably, there will be a falling out: two stars is one too many. In one case, two corporate psychopaths worked in the same company but were in different divisions and rarely interacted. Historically, there may have been instances of psychopaths working together. One wonders who was "more" psychopathic: Joseph Stalin or his henchman, Lavrentiy Beria, chief of the secret police.

Have the Internet and other technological developments aided psychopaths?

Hare: Immeasurably! The Internet and technology have given psychopaths and other predators access to a virtually unlimited pool of potential victims. They can promote phony stocks, circulate crooked investment schemes, siphon off bank accounts, commit identity theft, and so forth, all with little risk to themselves. They also can promote themselves by constructing fake or greatly embellished Web sites and credentials in order to lure unsuspecting victims. In a very real sense, the Internet and associated technology represent a paradise on earth for fraudsters, with even better things to come.

The business world of the 1980s and 1990s went through startling changes after decades of relative stability in culture and procedures. And now we're in an economic slowdown or possible recession. Have these changes helped or hindered psychopaths in organizations?

Babiak: While economic slowdowns can lead to layoffs and plant closings, there is still the need for seasoned, experienced leaders who have the wherewithal to meet the challenge of recovery and turnaround. These individuals are rare. What a perfect scenario for the psychopath to enter as the "solution," replete with the skills (faked), abilities (faked), and background (faked) necessary to take over and makes things right.

There is also greater access to higher education in general than before, as well as questionable online degrees that can be bought and used by psychopaths to pad their résumés. Losing one's job no longer bears the stigma - or provokes as much concern - as it once did; layoffs and plant closings have left many truly stellar executives with gaps in their employment histories. Economic conditions can be a convenient explanation for short tenures listed on the resume. While a psychopath would be expected to blame the former boss's personality or colleagues' underhandedness for losing his or her job, a really clever one can feign some sadness at having to leave "a great job at a great company" due to economic conditions.

You've written that organizations have become more "psychopath friendly." What do you mean by that?

Babiak: The change of organizational structures from large and bureaucratic to lean, mean, and flat has inadvertently made companies more attractive to psychopaths (fewer rules) and, at the same time, easier to negotiate (faster progression). There is more opportunity for a motivated psychopath to stand out amongst his or her peers, less hoops to jump through, and shorter distances to the top. Changes in work values among employees have also facilitated entry by psychopaths. Many companies, initially puzzled by the demands of "younger" workers for large sign-on bonuses and promotions at least every two years, are beginning to accept this as part of a new work style that needs to be accommodated in some way. A young psychopath would fit in quite nicely in this culture.

You've written that you doubt that psychopathic individuals would be very successful in a highly structured traditional bureaucracy. Why is that?

Babiak: Bureaucracies, by design, are rule-bound structures. They are the result of a stage of organizational development in which companies attempt to systematize their operations in pursuit of consistency, quality, and productivity. An unfortunate outcome also is that they can become quite boring, slow to respond, and intolerant of creativity and innovation.

During the 1980s and 1990s, the speed required of businesses to maintain their positions, and perhaps grow market share, increased. This put a tremendous strain on organizational systems - the bureaucracy - as well as on employees and managers - the culture. The mantra became "do more, better, faster with less" - a difficult task, at best. In response to accelerated market demands, organizations began to jettison parts of their bureaucracy - policies and procedures - in the nterest of speed. Entire levels of management were eliminated under the theory that communications would improve from top to bottom. Systems once thought to be helpful were eliminated or "reengineered" away. By eliminating those policies and procedures that could help uncover psychopathic behavior - formal performance appraisals are a good example - and systems that help prevent their hiring - structured employment practices - it became much easier for someone with psychopathic tendencies to slip in and look successful.

Unfortunately, this is where the psychopath has an advantage; these new structures are always in a state of flux and never reach the "ideal" state. We call them "transitional organizations" because the transitioning never ends. This frustrates and confuses those who have grown accustomed to the stability that large organizations used to provide. Being a thrill seeker by nature, the psychopath relishes the chaos. On a practical level, a constantly changing work environment provides the psychopath an endless source of new coworkers to target and many opportunities to move from project to project when boredom sets in.

Can you talk about how psychopathic fraudsters use affinity groups (religious, political, or social entities in which all members share common values or beliefs) to pull off their schemes?

Hare: We refer to these schemes as affinity fraud. They rely on the fact that members of an affinity group typically are very trusting of others who profess to share their values, beliefs, and interests. Those who are most adept at perpetrating affinity fraud are psychopaths who gain entry into the group by developing an acquaintance with a member who then introduces the fraudster as "one of us." The result is a "fox in the henhouse," with predictable results. Religious groups, are particularly vulnerable; belief in the inherent goodness of others and uncritical acceptance of professions of faith are tailor-made for an enterprising psychopath. Sadly, even after being victimized, many members of a group will refuse to face the truth, continuing to believe that the scamster is basically good at heart or that there must be a reason why he or she took advantage of the group. Even sophisticated members of financial and business groups - such as investment clubs - often are no match for the charm and seduction of a good-looking, well-dressed, and apparently well-connected psychopath. A suspicious view of newcomers might help but is no guarantee of immunity to infiltration by someone intent on doing the group harm. Even organizations that by their very nature are extremely cynical and suspicious - such as intelligence agencies and criminal gangs - cannot protect themselves completely from those who misrepresent their credentials, connections, and intentions.

Joseph Wells, the founder and chairman of the ACFE, has concentrated on teaching not just about fraudsters' actions but their psychological motivations and aberrations. How can a group like ours aid its members in spotting possible psychopaths and prevent them from transforming their behaviors into crimes?

Babiak: Increasing the professional standards and training of fraud examiners is a good foundation. Knowledge about the nature of psychopaths and of the strategies and tactics they use is important. Even so, it can be very difficult to spot them without detailed information from a variety of sources about their behavior and manipulations especially if you are the one being targeted. It is also important for examiners to understand themselves and how their own personality traits and vulnerabilities may play into the hands of a psychopath. A confidential "hot line" could be made available to members who have suspicions and need coaching and advice on how to proceed.

Are most psychopaths in organizations exposed or do they remain or go on to greater positions?

Babiak: With one exception, all of the psychopaths that we have studied are still in positions of authority in their companies. In some cases, they have risen within the ranks, and in others, they have solid positions from which they continue to use their organizations for personal gain. The one psychopath we studied who was fired ended up leaving with a sizeable financial package and a company car. He was hired by a competitor at a significantly greater salary. Unfortunately, in their effort to rid themselves of problems and to avoid embarrassment in front of corporate or financial communities, some organizations will cover up their messes and even write favorable letters of recommendation thus facilitating psychopaths' devious journeys up corporate ladders.

Since the publication of "Snakes in Suits," we have received an increased number of calls from executives, entrepreneurs, and principals who now suspect that someone on their staff - or even an equity partner - is a corporate psychopath. We see that awareness of the problem has increased, as has the willingness to take action to remove or otherwise deal with the problem person.

How does a fraud examiner identify possible psychopaths after they're hired? I imagine it's a sensitive issue to put the psychopath label on anybody, but how should a fraud examiner proceed to prevent a possible fraud or should they even try? Is it ever possible to discern the potential for fraud in a suspected psychopath?

Babiak: In business situations, it is rarely useful to label someone a psychopath; organizations can only respond to the overt behaviors of fraudsters and others. Suspecting that a client (or even a coworker) has psychopathic traits can help sensitize an examiner to search out and investigate subtle forms of lying and deceit. If the client is highly psychopathic, the odds are that some form of corporate misbehavior, perhaps fraud, is underway, but hidden from view. If inconsistencies and improprieties begin to surface, it is important that the examiner's focus remain on the facts of each case, as the psychopath will try to distract him or her through flattery, misdirection, questioning the examiner's competence or authority to investigate, and so forth.

What steps lead to the confrontation of a psychopath and how is it carried out? Can a psychopath ever be rehabilitated?

Hare: Like anyone suspected of corporate misbehavior or fraud, confrontation of a suspected psychopath should occur after all the facts have been obtained, verified, digested, and interpreted, and in accordance with corporate policies and due process. In addition, however, it is important to anticipate the potential reactions of the psychopath, which may include "plausible" indignation and denial, diffusion of blame and responsibility, appeals to a "higher" authority, verbal abuse, and threats of litigation. In such cases, it is essential to ensure that the case against the individual is factually and legally sound and to "stand one's ground."

A somewhat different tactic sometimes employed by those accused of misbehavior is to admit it, claim that the behavior was out of character, and solemnly pledge to change. However, when dealing with a suspected psychopath such tactics should be treated with a healthy dose of skepticism. There is little evidence that psychopaths can be, or even believe that they should be, rehabilitated. Their behavior reflects a well-established, stable personality structure. Most people have some insight into the motivations for their own behavior, and will accept that changes need to be made in order to be a good corporate citizen. Unfortunately, psychopaths already are aware of their own motivations, see little wrong with them, and do not believe they need to change. However, if they think that "rehabilitation" can serve their own selfish, pragmatic ends, then they are quite capable of playing the game, portraying themselves as a "saved" or "redeemed" sinner.

Purpose
Fraud Magazine is a 72-page, four-color magazine published bi-monthly by the Association of Certified Fraud Examiners (ACFE) as a service to its members and others interested in the deterrence and detection of fraud and white-collar crime. Articles published in Fraud Magazine cover a variety of topics related to white-collar crime, including forensic accounting; fraud investigation techniques; white-collar crime statutes, legislation, and regulatory issues; computer and management information systems abuse; and industry-specific concerns such as insurance, healthcare, and financial institution fraud.

To get away with investment crime in Canada and elsewhere is easy. Simply claim that there was "an unknown degree of risk" once anything you sell explodes in a customer's face. Take no responsibility for poor manufacture, for misrepresentation, for false ratings, for smoke and mirror guarantees that you may have promised but failed to provide when push came to shove. Let your clients eat the losses. Never the product manufacturer. Chaulk it up to market risk, and basically you will never be punished, no matter how pre-meditated your investment product was to fail.

You get better protection when buying chinese made goods in a Wall Mart store than you will get buying financial products in Canada.

David Callahan's book, "THE CHEATING CULTURE: Why More Americans are Doing Wrong to Get Ahead", suggests that people have two moral compasses. One to know the difference between right and wrong and another that wants to get ahead at any cost. "Good people placed in a situation where there is a lot of incentive to cheat and not a lot of percieved punishment if they get caught".

"We live in a winner take all society in which those at the top receive astonomical compensation, so they are willing to take risks."

"The logical culmination of the trend is Thirld World type of corruption where everyone is cheating and cheaters assume everyone else is cheating.

(advocate comments........I am inexperienced with many of the industries out there. I am also inexperienced but convinced that the pharmacuetical industry is almost overcome by this problem. My experience is entirely with financial services (investments) and I have to say that the proof is in. The cheating, and abusing of clients is so widespread and rampant as to be accepted by the vast majority, including those responsible for policing the industry, and pointing out the abuse. They have become so rewarded for going with the flow, that it will be a slow, painful process for the entire truth to come out.)

It is March 17, 2008, and Conrad Black's lawyers are pleading for the court to throw out convictions against Conrad based on variations of the "can you prove intent" theme.

They state that "..............there is simply no way and rational juror could find...........that defendants contemplated (or carried out) a scheme to misappropriate money................"

I find this interesting reasoning for a few reasons. One is that the argument that releases far too many white collar criminals from responsibility for their actions and their damages does not refelect the interests of society. Even in a recent hockey game I listened to someome tried to argue against a penalty due to an accidental stick infraction..........the decision was that whether intentional or not, the player is still responsible for his stick. Why can we not recognize the same due process towards responsible action with respect to financial crime?

Also, for the lawyers to comment about whether or not the sceme was "carried out" seems a bit unusual, since I thought the understanding was that the cheques were cashed and the money spent by the defendants. It seems as if it was indeed carried out.

Conrad Black's crimes, when measured against the dollar value of normal property crimes in Canada (from Justice Canada) add up to the same amount of damages done by this one man, that would ordinarily take between 150 and 1500 burglars, car thieves, crack addicts to do as much damage as he is reported to have done. (depending on which dollar value he is believed to have absconded with, $6 mil or some say $60 mil)

Do we give special treatment to someone who can do the damage of literally hundreds of criminals? If we do, we put our society on a slippery slope where crime does indeed pay, and that is one step toward the breakdown in an orderly society.

In contrast to the search for the few “bad apples”, my colleagues and I argue that the majority of unethical events occur as the result of ordinary and predictable psychological processes. As a result, even good people engage in unethical behavior, without their own awareness, on a regular basis. This argument is developed and documented in much of my recent work. The following is a partial list of recent work that develops this idea:

Tenbrunsel, A.E., Diekmann, K.A., Wade-Benzoni, K.A., &. Bazerman, M.H. Why We Aren’t as Ethical as We Think We Are: A Temporal Explanation. In B.M. Staw and A. Brief (Eds.), Research in Organizational Behavior, in press.

OK, I was wrong. There is some enforcement of white collar crime in Canada. On this earth it comes from the United States Justice Dept and the SEC, and in the alfterlife.............see below:

Fewer confessions and new sins
By David Willey
BBC News, Rome

The Vatican has brought up to date the traditional seven deadly sins by adding seven modern mortal sins it claims are becoming prevalent in what it calls an era of "unstoppable globalisation".

Those newly risking eternal punishment include drug pushers, the obscenely wealthy, and scientists who manipulate human genes. So "thou shalt not carry out morally dubious scientific experiments" or "thou shalt not pollute the earth" might one day be added to the Ten Commandments.

Corporate rewards for failure
February 01, 2008
DAVID OLIVE
The unlamented World Weekly News, a sensationalist supermarket tab that expired last year, was
home to pseudonymous columnist Ed Anger. When he was in top form over a particular outrage,
the WWN's house curmudgeon pronounced himself to be "pig-biting mad."
We should all be pig-biting mad at the stupendous rewards for failure granted to the authors of
the global credit crunch, which originated with the predatory U.S. lending practices in 2003 that
triggered a bubble in U.S. house values that finally burst last year.
The epic U.S. housing collapse has already cost global banks and brokerages, including our very
own Canadian Imperial Bank of Commerce, more than $135 billion (U.S.) in writedowns on
soured loans. By some estimates, the losses will reach as much as $800 billion by the time all the
ticking time bombs of precarious loans are accounted for. That sum is bigger than the economic
output of all but the world's largest nations.
Worse, between 500,000 and two million Americans will lose their homes to foreclosure over the
next year or so. Worse still, the global credit system is in semi-paralysis. Big losers on so-called
"subprime loans" ranging from giant Swiss bank UBS AG to the second biggest French bank,
Société Générale SA – yes, the one that also dropped more than $7 billion last week due to the
fraudulent actions of a single trader – are unwilling to lend until they can get some sense of the
enormity of their potential losses.
That and the simultaneous deflation of U.S. house values – which have plummeted as much as 40
per cent in Florida, California, Michigan and other hard-hit states – accounts for a U.S. downturn
that many economists already are describing as a full-blown recession. Banks don't want to lend,
and consumers with negative home equity are no longer able to spend. The implications are
global, affecting Canada and every other nation that relies on exports to the world's largest
consumer market.
For their roles as abettors in this calamity – one of the biggest systemic failures in financial
history – only a handful of CEOs have lost their jobs. Among them, the CEOs of Merrill Lynch &
Co., America's largest brokerage, and Citigroup Inc., the top bank, left with parting gifts of $161
million and $68 million, respectively.
Then there's Angelo Mozilo, founder and CEO of Countrywide Financial Corp. Mozilo's firm was not
only the largest and most aggressive marketer of "subprime loans" but an inspiration to smaller
fry emulating Countrywide's model of pocketing upfront fees from low-income Americans, often
with no collateral or down payment to offer, and sweet-talking them into buying homes they
couldn't afford at initially low "teaser" rates that are now "resetting" at usurious rates.
Mozilo has unloaded more than $400 million worth of Countrywide stock over the past three
years, much of it last year as signs of the historic crash began appearing on the horizon.
Meanwhile, on Wall Street, investment banks that joined the commercial banks as enablers in this
colossal misallocation of capital are paying record bonuses to employees for fear of losing talent
to rivals.
TheStar.com - columnists - Corporate rewards for failure Page 1 of 2
http://www.thestar.com/printArticle/299415 2/1/2008
Morgan Stanley, whose subprime losses have forced it to seek $5 billion in bailout aid from a
Chinese state investment fund, just paid $16.6 million in total employee compensation last year –
an 18 per cent increase over 2006.
If the world was a Frank Capra movie, the architects of this horror story would forfeit not only
their golden parachutes but the annual salary and bonuses they earned in the halcyon years
when malodorous financial strategy was immensely profitable, before it became one of the
greatest business fiascos of all time.
There will, of course, be no such satisfying ending. But do remember Mozilo's name the next time
someone tells you that executive compensation in the corporate sector is based on "pay for
performance." Warren Buffett once noted that the absurd compensation for mere caretaker CEOs
was "a reward for the passage of time."
At least a competent caretaker doesn't let the building burn down. In this case, corporate
stewards are getting an obscene reward for putting greed ahead of prudence. The lesson won't be
lost on future masters of the universe tempted to perpetrate reckless endangerment.
dolive@thestar.caTheStar.com - columnists - Corporate rewards for failure Page 2 of 2
http://www.thestar.com/printArticle/299415 2/1/2008

Jan. 31 (Bloomberg) -- Canadian Imperial Bank of Commerce, which has had more writedowns and charges than any Canadian bank this decade, paid its top executives about C$575 million ($573 million) over the last nine years, a study by an independent analyst shows.

The report by Diane Urquhart lists total compensation for 12 current and former executives, including Chief Executive Officer Gerald McCaughey, who was awarded C$102.9 million over the period, according to Urquhart's calculations.

Urquhart, a former director of equity research at Scotia Capital and Burns Fry Ltd., said the Toronto-based bank rewarded senior executives even as it recorded debt writedowns and other costs.

Charges taken by the bank include $2.4 billion in 2005 to settle claims related to energy trader Enron Corp., a record one-time cost for a Canadian bank. The lender has also announced about $3.2 billion in pretax writedowns on investments tied to the U.S. subprime mortgage market.

In her study, Urquhart made assumptions about parts of McCaughey's 2007 compensation, such as bonuses, which won't be determined until the end of the fiscal year. In 2006, his first full year as CEO, he was awarded C$9.05 million in salary, bonus and stock-based compensation, CIBC said yesterday.

McCaughey was the third-highest paid bank CEO in Canada that year, trailing Gordon Nixon at Royal Bank of Canada and Edmund Clark at Toronto-Dominion Bank, according to bank filings.

Merchant Banking Compensation for some CIBC executives included about C$140 million awarded from the bank's now-defunct ``Special Incentive Plan'' that paid out a share of profit from merchant-banking positions, Urquhart said.

CIBC spokesman Rob McLeod referred to a bank filing yesterday, stating the firm ``is committed to providing competitive compensation, for both the executive and broader employee populations, that is competitive with market practice and adjusted as appropriate to align with performance.''

Urquhart hasn't done a similar study for any other Canadian bank. Canadian Imperial is Canada's fifth-biggest bank by assets.

Canadian Imperial rose 98 cents, or 1.4 percent, to C$69.68 at 2:46 p.m. trading on the Toronto Stock Exchange, and has fallen by almost a third in the past year, the worst performer among Canadian bank stocks.

A decline in personal standards of morality and an increase in greedy executive compensation lie behind the corporate scandals that have emerged in recent years, according to one of the most outspoken members of Canada's corporate elite.
Adam Zimmerman, retired CEO of Noranda Forest Inc. and a former director on numerous major Canadian boards, told a business audience in Toronto yesterday that he is "anguished" by the excessive levels of compensation he sees today, citing a recent example of Citigroup chairman Sanford Weill, who earned a total of almost $1-billion over the past decade.

"These huge remuneration schemes are the root cause of all that is going wrong in the world," Mr. Zimmerman said in a speech to the Toronto CFA Society.

Mr. Zimmerman says boards are under a misperception that they have to reward their CEOs excessively because they are the only people qualified to run their companies.

"It's a real false belief there's only one guy who can run any one of these big companies. There are a lot of good people out there."

Mr. Zimmerman said he blames disclosure rules that require companies to reveal the compensation of their top executives, saying they caused executives to begin competing for higher salaries. He said the major banks are the "princes" of the compensation world, and other companies have followed them.

"The end of it is that it's not at all indecent to produce any amount of money provided the company has the cash," he said.

Mr. Zimmerman suggested executives should be required to also disclose their charitable donations, and said CEO pay should be put into perspective with the salaries of normal employees at their companies.

"Were it not that they do it within the law, I would think executives are stealing money," he said.

Mr. Zimmerman said many recent corporate governance initiatives are little more than an attempt to create systems to control human nature, which is difficult to do. Many new standards are based on the simple idea that honesty is the best policy, he said.

"There was a time when individual ethics governed behaviour . . . There was trust and honour. Business, however, has become much more complicated . . . Personal morality has been bent out of shape, and every company thinks it's unique."

Also yesterday, securities lawyer and corporate director Peter Dey told the CFA Society that most complaints he hears about corporate governance going too far are based on concerns that directors have a limited amount of time and are wasting it on due diligence and technical compliance issues.

He said governance hasn't gone too far, but boards haven't done enough to find more efficient processes to free up time to focus on their main task. He said part of good governance is finding ways to resolve this dilemma.

He added that many new governance requirements demand a great deal of time as new systems are being created, but much less once they are in place.

"It's very important to have fun as a director. And the most fun as a director is not receiving legal advice . . . The most fun as a director is understanding a company's strategy and being able to contribute to the development of the strategy."

EXECUTIVE COMPENSATION

CIBC chief took home millions

TARA PERKINS AND JANET MCFARLAND

January 31, 2008

Canadian Imperial Bank of Commerce chief executive officer Gerry McCaughey made $9.4-million in 2006, the bank disclosed yesterday in its shareholder proxy circular.

CIBC, which is the first of the Big Five banks to report compensation numbers this year, sets the CEO's compensation on a retroactive basis, and has not yet determined Mr. McCaughey's bonus or share awards for fiscal 2007, which ended Oct. 31.

His base salary remains $1-million, the bank said. In 2006, Mr. McCaughey was awarded a bonus of $3.07-million and restricted shares worth $4.23-million.

He became CEO of the bank in August, 2005, just as it took a $2.4-billion (U.S.) charge to settle legal matters related to Enron Corp.
In fiscal 2007, the bank took $777-million in writedowns as a result of subprime mortgage losses, and has since announced $2.46-billion in writedowns that are being booked in fiscal 2008.

The bank's compensation committee, "on behalf of the board, has full confidence in the leadership of the chief executive officer and his ability to execute on CIBC's strategy to deliver consistent and sustainable performance over the long term," the proxy circular states.

Meanwhile yesterday, a new report by independent analyst Diane Urquhart estimates nine top CIBC executives made at least $120.5-million (Canadian) from a special incentive plan created in 2000 to link executive pay to merchant banking investments. She believes the plan was likely related to the bank's lucrative investment in U.S. technology company Global Crossing Ltd.

Ms. Urquhart estimates former CIBC chief executive officer John Hunkin earned a total of $90.4-million between 1999 and his retirement in 2005, including $27.4-million on shares awarded under the special incentive plan.

She estimates current CEO McCaughey has made $102.9-million, including shares worth $22.3-million he received under the incentive plan that he still holds. Those calculations are based on valuations at the end of fiscal 2007.

Her analysis also estimates top executives at CIBC have reaped more than $500-million in compensation - including options and shares - since 1999, even though the bank has stumbled through a series of costly mistakes.

The report argues the compensation totals have been "egregious" given the "reckless risk-taking" that has hurt CIBC's share price, including the subprime mortgage crisis, Enron settlements and a writedown of the bank's investment in the Amicus electronic bank.

Ms. Urquhart calculates shares awarded under the special incentive program were worth about $92-million when they vested in 2003.

She used insider trading filings to calculate that the shares were ultimately worth at least $120.5-million by the time executives sold them. Some executives still own the shares or left the bank before selling them and no longer have to file insider trading reports.

She estimated the total gains for those individuals based on the assumption they still owned the shares as of Jan. 25 and had not sold them.

Also yesterday, Bank of Montreal said its CEO, Bill Downe, earned $5.83-million last year, not counting $3.8-million that the bank put toward his future pension costs.

It was Mr. Downe's first year on the job as CEO. In light of the bank's financial performance, and consistent with Mr. Downe's own recommendation, he did not receive a bonus, BMO said.

The bank's earnings per share fell 20 per cent in 2007, as it suffered hundreds of millions of dollars in losses from its commodity trading operations.

THE decision is in, the news is out. Another high-profile corporate executive in the name of Conrad Black has bit the dust. Guilty of mail fraud and guilty of obstruction of justice. What a tumble from the ranks of success! What a shame!

Yet, while the crackdown on corporate fraud has been ongoing for at least five years and there's been a demand to fix things through new legislation or accounting rules, there hasn't been much fuss about one of the key underlying elements of corporate fraud: that of extreme arrogance or hubris.

As evidenced by this recent example of complex, self-serving behind-the-scenes transactions, executive arrogance is much more than just a faulty personality. You now know it will inevitably hurt your corporate image and your bottom line. In fact, this behaviour can literally drive your company to ruin.

Thinking they are above the law, arrogant executives often see more regulation and rules as simply new opportunities to look for loopholes and devise clever corporate opportunities to continue funneling resources to their own pockets.

But what is arrogance? The Merriam-Webster dictionary suggests the term stretches back to the 12th century and refers to having or displaying excessive self-esteem such that individuals show scorn and disdain for those they consider inferior. It suggests conceit and a contemptuous haughtiness that often results in tyrannical, controlling behaviour.

In layman's language, we might say that arrogant individuals think nothing of "thumbing their nose" at the law, sincerely believing that any corporate system of checks and balances do not apply to them. If Harry Potter, the young lad from the famous Hogwarts School of Witchcraft and Wizardry were asked his opinion, he might say that instead of fighting against evil, these arrogant executives have created a dangerous cauldron of brew that poisons the goodwill of shareholders, the employees and the public alike.

Where do these arrogant "dragons" come from anyway? Some psychologists say these individuals grew up constantly being compared to impossible standards and harbour serious self doubts about their worthiness. Their personal power and security comes from needing to know it all or having it all.

According to Wilson Banwell, a leading human services organization, individuals build their arrogance on a foundation of either truth or illusion. They strive to escape their insecurity by seeking some kind of higher status that will show the world they are more than just ordinary. They seek to gain power through special qualities or possessions such as money, intellect, education, lineage, title or job status, good looks or athleticism. They then use these attributes to align themselves with some kind of exclusive status group.

But no matter what the source of arrogance, their assumed superiority soon bleeds into their assumptions about themselves as a whole. Similar to Conrad Black -- who strove so hard to gain a lordship -- once they have gained this status, they feel they have finally "arrived" in the land of the privilege and exclusivity. They literally believe they are invulnerable or untouchable and treat others with a condescending attitude and measured humiliation.

Can you imagine the impact of extreme arrogant behaviour on the culture of an organization or on the morale and productivity of employees? No matter which way you look at it, neurotic executive behaviour styles such as this create dysfunctional behaviours throughout the workplace. Employees live in fear of management and experience frustration, anger, confusion and powerlessness. Employee turnover is typically high, not only at the front line level, but also at the senior level of the organization as well, because no one will tell "the emperor he has no clothes." They don't dare; the executive won't listen; instead, the employee will leave.

It has taken a long time and some high-profile punishments, but companies of all sizes are finally recognizing that arrogant leadership behaviours do not make for a successful venture. With such a shortage of top talent in the marketplace and demands from shareholders for transparency and effective leadership, companies are finally taking action. They are putting ethical policies and practices in place, employing ethics officers or ombudsmen and are seeking out leaders who demonstrate open and honest leadership. They are determined to drive unrepentant, twisted, arrogant thinkers out of their company.

Companies are also ensuring that their vendors and suppliers are above reproach. They are seeking long-term relationships where uncompromising integrity is adhered to in every day practices. They are training employees on ethical decision-making standards, interpersonal conflict management and relationship building. And they are implementing tough measures to deal with any behaviour that puts their company at risk.

University researchers are beginning to weigh in on the issue as well. At Ohio's University of Akron Summit College, for instance, Dean Stan Silverman, in conjunction with several colleagues, recently released a report on a groundbreaking research study called Arrogance: A Formula For Failure which studied the relationship between arrogance and corporate performance. In addition, they have now designed a special Workplace Arrogance Scale (WARS) that will help to acquire empirical data on this issue. Once this is perfected, I can only see that corporations will quickly add this valuable tool to their repertoire of candidate assessment products.

At the same time, I hope arrogant executives, no matter whether they are in large or small organizations, will also sit up and pay attention. You need to listen to the key messages of Black's guilty verdict. You need to seriously take notice that your job, your career, your public image, your personal security and perhaps your wealth is at stake. Society won't stand for it any more. And, keep in mind, no one is above the law.

interesting comments today from Lord Black of whatever-he-lords-over, as written in the globe, June 8, 07 by Paul Waldie, "BLACK LASHES OUT OVER STATE OF CRUMBLING EMPIRE".

In it he is quoted as referring to his former crumbling companies under the stewardship of receivers........"Charlatans", he refers to them as.

The article goes on to quote, "there is no possible justification for the fees they have charged".

Is it just me me or is there some irony in a guy who appears to have lived the life of some kind of .......well, LORD, not only in his mind, but in his lifestyle, using corporate homes, jets, salaries and his position to do so, to be criticizing other for allegedly doing much the same??

The article goes on to state that some of the expense of his former crumbling companies is about $79 mil in legal fees paid for Mr. Black.

“The salary of a chief executive of a large
corporation is not a market award for
achievement. It is frequently in the nature
of a warm personal gesture by the
individual to himself.”
- John Kenneth Galbraith

Lord Black might someday be found out to be totally innocent........or he might on the other hand be found out to be a very, very generous man. (When using other peoples assets)

I cannot wait for the day when psychopathic profiling is a well accepted concept for corporate, government and other such "leaders", or those who gravitate to those kinds of roles. It will be fascinating to follow with these kinds of scientific tools, and it may explain some of the madness and entitlement of some in the headlines of late.

No. 178A No 178A
ISSN 1180-2987
Legislative Assembly of Ontario
Second Session, 38th Parliament
Official Report Journal of Debates (Hansard)
Tuesday 29 May 2007
Speaker Honourable Michael A. Brown
Clerk Deborah Deller
9057 LEGISLATIVE ASSEMBLY OF ONTARIO 29 MAY 2007
Mr. Michael Prue (Beaches–East York): On a point of order, Mr. Speaker: I rise today to introduce
and welcome supporters of my new private member’s bill. Those people being present are: Stan Buell,
president of the Small Investor Protection Association; Art Field, president of the National Pensioners
and Senior Citizens Federation; Judy Muzzi, past president of the United Senior Citizens of Ontario;
and Pamela Reeve, a member of the investor advisory committee of the Ontario Secur-ities
Commission. They are here to see the Legislature in its full flower. Welcome.
9058 LEGISLATIVE ASSEMBLY OF ONTARIO 29 MAY 2007
CONRAD BLACK EXECUTIVE COMPENSATION ABUSE ACT, 2007
Mr. Prue moved first reading of the following bill:
Bill 230, An Act to amend the Business Corporations Act to provide protections against executive
compensation abuse / Projet de loi 230, Loi modifiant la Loi sur les sociétés par actions afin de prévoir
des protections contre l’indemnisation abusive des membres de la direction.
The Speaker (Hon. Michael A. Brown): Is it the pleasure of the House that the motion carry? Carried.
The member may wish to make a brief statement.
Mr. Michael Prue (Beaches–East York): The Business Corporations Act, also called the
Conrad Black act in short, is amended to add provisions respecting compensation of executives.
Provisions are added requiring that a vote on executive compensation be held at every annual
meeting of shareholders of a company that offers securities to the public. The act is also
amended to provide that if certain executives do not meet any job performance standards to
which their compensation is related, they must pay back a portion of that compensation.

Many years ago, I spent the majority of my time studying the works of the Drexel Burnham Lambert and its evil junk bond empire. One part of the empire was insurance companies, which Drexel used as a blood bank to buy its overvalued (but by no means valueless) securities.

The money these Drexel guys made was stupendous. I was envious. I wanted to be rich, too. It occurred to me that I, who had a tiny amount of money put by, might be able along with some others to buy a small insurance company, loot it the way I had seen the Drexel people do it (they, of course, disputed that they did it ), and then I would be rich.

After all, I had studied closely how it was done, and I was fairly sure I could do it and become financially independent for life. Yes, I would surely be sued, but I would settle for pennies on the dollar and walk away still a rich man.

"How Could You Look Yourself in the Mirror Every Morning?"

I told one of my closest friends, a brilliant lawyer named Daniel Mogin, my idea. He agreed that it would work, but then he said, "I know you. You're not that kind of a guy. You wouldn't be able to live with yourself knowing you had looted innocent people out of their insurance policies and cheating people who had never done anything but trust you."

He was right, and his words were like the script of one of those old movies where a wavering soldier is slapped in the face by his superior, and the waverer then says, "Thanks. I needed that." I needed to realize that my wanting to be rich is a pretty damned selfish, ridiculously unethical, and trivial matter compared with betraying the trust of people in America who had been so good to me and to my family. I never thought of it again, and I hope I never will.

But the memory comes to mind as I watched TV and saw the conviction on May 25 of Enron's Kenneth Lay and Jeffrey Skilling on many counts of looting their company, fraud, insider trading, and other illegal acts.

What I kept thinking was, "Mr. Lay and Mr. Skilling, the people you were looting were men and women at your company who had their life savings in Enron stock. They were men and women who you passed by in the hall every day. They were the people who made your coffee and brought you your mail and parked your car. They were people who were proud to work at Enron and thought they were at a heads-up deal. They trusted you with -- quite literally -- their lives. They never did a bad thing to you, and yet you ruined their lives and their hopes. You sold Enron stock while telling them to buy it. You knew the company was a shell game, and yet you urged totally innocent people to buy still more of it for their retirement accounts. How could you look yourself in the mirror every morning?"

More Looting

Now, it would be nice if the Lay and Skilling convictions marked the end of this kind of fraud. The terrible part is that it's still going on in a huge way. Lately, investigative reporters at "The Wall Street Journal," aided by university professors, are discovering that top executives at some of the biggest companies in the nation are looting their companies in an almost unbelievably brazen way.

This is how it was carried out: Companies often issue stock options to executives as part of their compensation. These options allow managers to buy stock at a certain price, supposedly chosen based on an average stock market price for a period or some other similar metric. If the stock price rises above that option "strike" price, the boss makes money. If the stock falls below it, he doesn't.

But the men in these recently uncovered deals were apparently secretly and fraudulently back-dating the strike price to be the lowest price of the year or the quarter long after the stock had risen dramatically from that price. Thus, a huge profit was built into the deal, a kind of profit totally unavailable to executives at honestly run companies -- and to ordinary stockholders.

That is, suppose a company's stock price had fluctuated between $10 and $50 per share over a year. At the end of the year, the compensation committee of the board of directors would find the day the stock was $10 and make that the strike price, designating the week that price occurred as the week when the options were granted. The men who had these options were guaranteed to make money -- lots of money. One of the men in question, at huge HMO, had made more than a billion dollars (yes, with a B) on his options.

For Rich Guys, Isn't It Ever Enough?

As I see it, this is the most explicit kind of insider trading (a felony), fraud in that it was not disclosed in the companies' filings, which gave no hint that the strike prices were rigged (also a felony), looting of corporate property in that this behavior is going to trigger immense accounting liability for the company and likely large federal penalties (possibly also a felony). I see it as plain stealing the stockholders blind.

What I keep thinking is, "Isn't there ever enough for you guys? You're already rich in every single case. You already have immense corporate perks. Isn't that enough? Do you also have to steal?"

The stockholders of these companies bought in good faith. They trusted management with their financial futures. What kind of people would rob from men and women who had already paid them immense wages and perks and had never done a mean thing to these guys?

Just by the law of large numbers, some of the people who were being ripped off in these cases and at Enron were soldiers now fighting in Iraq or Afghanistan, firemen risking their lives to save children in burning houses, teachers struggling to teach children without fathers. How could these executives steal from such people?

An Insane Executive-Compensation Culture

Now, we have a big challenge in America. Will we prosecute these people to the fullest extent of the law? Or will we let them off with civil penalties that are paid by insurance companies or the stockholders themselves in any event?

In many U.S. states, if you rob a convenience store with a gun and get $40, you go to prison for 20 years and you should. If you sell marijuana and are caught three times, you go to prison in some states for life -- even if no one was really injured. If you're a black kid who steals a bicycle, you go to jail in many places.

But what if you use cunning stock-option plays to unethically make hundreds of millions? Then, you get a Gulfstream Jet, ski chalets, and nine-figure bank accounts.

This is a national disgrace. We absolutely have to make an example of these corporate wrongdoers and the boards of directors that let it happen. And the example I gave about phony stock-option prices is only one of many. The whole executive-compensation culture has become insane, with corporate executives draining the lifeblood of the nation while worker salaries stagnate, and employees lose their jobs and their pensions (just talk to the people at United Airlines or Delphi).

This country is at war. It's an outrage that while we're at war, executives who are already fabulously rich are stealing and are at liberty. America is humiliated by its brightest and most ambitious looting it, while its young men and women die for it.

If these people have no shame, if they had no Dan Mogin to slap them and wake them up to their duty to their neighbors, maybe the Graybar Hotel will be a wake-up call to the next generation who consider that theft is just a part of their compensation package.

President Bush is looking for an agenda at home. How about a simple one? Justice for all.